US Gulf of Mexico Oil Lease Sale Another Bust

The U.S. Department of Interior’s Bureau of Ocean Energy Management (BOEM) had more than 77 million acres — the most ever in a single offering — of U.S. Gulf of Mexico offshore leases for sale Wednesday. That’s 14,431 blocks of which just 148 were bought.

The sum of the high bids received from 33 companies that participated was $124.76 million, slightly more than the $121 million high bids received last October in a BOEM offer of 76 million acres. Just over 815,000 acres received bids in today’s offer, an improvement over the half million acres that received bids last year.

Exxon Mobil Corp. (NYSE: XOM) bid on just two blocks and did not win either bid. Chevron Corp. (NYSE: CVX) bid on 29 blocks and was the high bidder on 24. Chevron’s high bids totaled $36.64 million, nearly 30% of the high bids. Royal Dutch Shell plc (NYSE: RDS-A) won all 16 bids it made for a total of $22.93 million. Total SA (NYSE: TOT) won 9 of 9 blocks it bid on for a total of $15.11 million. BP plc (NYSE: BP) won 27 of 27 bids with a total of $20.01 million. No other company had high bids of more than $7 million.

There was little competition for the leases. The average number of bids per block was just 1.07 with most the action in ultra-deepwater blocks (53 bids) and shallow water blocks (43 bids). The highest number of bids for any block was three. Total won that one with a bid of just over $7 million ($1,341 per acre). The average price per acre was around $153.00.

Leases are valid for 5, 7, or 10 years, depending on water depth and royalty rates were also tied to water depth: 12.5% for depths less than 200 feet and 18.75% for depths greater than 200 feet. Today’s sale offered the discounted 12.5% royalty rate for the first time in an effort to drum up more bids.

The estimated amount of resources projected to be developed as a result of the proposed region-wide lease sale ranges from 210 million to 1.12 billion barrels of oil and from 550 billion to 4.42 trillion cubic feet of gas. The sale area was located from 3 to 230 miles offshore, in the Gulf’s Western, Central and Eastern planning areas in water depths ranging from 9 to more than 11,115 feet (three to 3,400 meters).

The BOEM estimates that the entire U.S. outer continental shelf [OCS] contains about 90 billion barrels of undiscovered technically recoverable oil and 327 trillion cubic feet of undiscovered technically recoverable gas. The Gulf of Mexico OCS, covering about 160 million acres, has technically recoverable resources of over 48 billion barrels of oil and 141 trillion cubic feet of gas.